Deep Blue Publications Group LLC, Eight golden tips for long-term investors
There are some rules of thumb to adopt. I can't promise to make
you rich but in time, you should be a bit better off. If you are investing
for the long term – 10 years or more – these eight tips might help:
1 How much risk are you truly willing to take? Peace of mind is
priceless. If you can't bear losing a quarter of your money in a year or two,
don't invest in shares. They can plummet.
2 Many people do not realise they need to save a good chunk of
money over a significant period of time to end up with a decent nest egg. Magic
shares that go up 50 or 100 fold are extremely rare. Compound interest is your
best friend and will multiply your money over time, preferably feeding it
through regular savings or top-ups if your income is variable. Saving €50 to
€100 per month might feel virtuous but is it enough for your investment goals?
You need a fund of approximately €350,000 to give you an income of
€18,000 per annum (half the average industrial wage) at the age of 65.
Even €200 a month over 30 years wouldn't get you to a €350,000
target. If you saved €200 a month into an average managed fund from January
1984 to January 2014, you would have built up a fund of €268,000 at the start
of this year – that's assuming the fund made a return of 9.4 per cent a year
and had an annual management fee of 1.7 per cent.
3 If you're a taxpayer, don't forget that long-term investment
is a no-brainer. Saving through a pension gives you a tax break of either 20 or
41 per cent, depending on how much you earn. Why give the taxman 20 or 41 per
cent of your hard-earned money?
4 Don't try to time the stock market. Many people won't have
the time or the money to seize opportunities, so regularly drip-feeding your
money into stock markets eliminates worries about buying at market highs or
selling at lows.
5 Read widely. Money journalists tend to be very knowledgeable
and bang up-to-date for investors, with insights on good value for money,
latest trends, hottest products, things to avoid and so on.
6 Diversify – don't have all your money invested in a handful
of stocks, one country, one sector and so on. Many unfortunate Irish investors
were heavily, if not entirely, weighted in Irish banks – with hazardous
results. Don't miss out on exposure to different returns – include small
companies as well as large, emerging markets in your investment porfolio.
7 Don't buy because the fees are cheap or the investment has
performed well in the past. Charges are definite – future performance is not.
The most expensive investment provider is not always the best. Active funds can
out-perform or under-perform passive funds; the issue is not choosing one
approach or the other but using both.
8 Good professional advice is invaluable if you're not
financially literate enough to make prudent investments decisions. for the
longer-term This is particularly the case as you get older and need to decide
on the timing of moving out of shares into safer assets.
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